Could a cornered Trump kill NAFTA on his own?

The best thing you can say about the first round of NAFTA talks is also the least thing you can say about them:

Donald Trump hasn’t tweeted about them. Yet.

He was too busy on other fronts — for instance, abdicating the moral authority of the American presidency in the aftermath of white supremacist rioting in Charlottesville. With the Trump presidency preoccupied with its implosion, the White House is doing damage control 24/7 and has left the NAFTA file in the hands of United States Trade Representative Robert E. Lighthizer and his team of professionals.

That’s the good news: The grown ups are at the table. Led by Steve Verheul, the Canadian team had 75 negotiators in more than a dozen meeting rooms at a Washington hotel during the opening five days of talks; officials discussed more than two dozen issues. They’ll reconvene in Mexico City September 1-5 and somewhere in Canada in late September.

The Americans were throwing their weight around, of course. It’s what they do. In drafting a joint communique at the end of the opening round, the U.S. wanted to refer to the talks as a “renegotiation,” while the Canadians and Mexicans preferred to call them a “modernization.” They compromised, agreeing to describe the talks as “a renegotiation to modernize NAFTA.”

The three countries also declared they were “committed to an accelerated and comprehensive negotiation process that will upgrade our agreement and establish 21st century standards.” In other words, the Americans don’t want the talks caught up in next year’s mid-term elections, and the Mexicans don’t want negotiations going on during their presidential and parliamentary elections next July 1.

The Americans made it very clear that dispute settlement and rules of origin are their major re-openers, and that their top priority remains reducing the U.S. merchandise trade deficit. Oh, and they want access to government procurement contracts in Canada and Mexico, while maintaining an America First position at home. Evidently, they define ‘reciprocity’ a little differently in D.C. these days.

Not surprisingly, USTR Lighthizer held to the demand in his July 17 Summary of Objectives for the NAFTA Renegotiation to “eliminate the Chapter 19 dispute settlement mechanism.” Equally unsurprisingly, this is a deal-breaker for Prime Minister Justin Trudeau, just as it was for Brian Mulroney in the first round of free trade talks 30 years ago.

But the language of the American position paper on trade remedies is not objectionable. They want to “establish a dispute settlement mechanism that is effective, timely and in which panel determinations are based on the provisions of the agreement and the submissions of the parties.”

The question is whether the continuous chaos Trump’s presidency generates weakens his hand in the trade negotiations, or whether he might even undermine the talks on his own to placate his base.

What the Americans are talking about is similar to the existing dispute settlement mechanism at the World Trade Organization and the one they negotiated with 11 countries, including Canada and Mexico, for the 2015 Trans-Pacific Partnership — which, ironically, Trump walked away from in an executive order on his fourth day in office last January.

As long as the principle of bi-national panels is respected, the language establishing them should be a secondary concern. The point is to avoid litigation in American courts. Neither Canada nor Mexico would ever agree to that.

On to rules of origin: The Americans want to increase the North American content in the auto industry from the current level of 62.5 per cent. But the Big Three automakers, and parts makers such as Magna and Linamar, are all opposed. In the assembly process, autos go back and forth across the borders half a dozen times, and some of the parts come from Asia.

As for Trump’s obsession with the American merchandise trade deficit, the president and his officials neglect to mention their surplus in trade in services. A modest Canadian surplus of $US12 billion in goods becomes a deficit of $12.5 billion when the American surplus in services is included. The Mexican merchandise trade surplus of $64 billion is mostly in auto and petroleum exports — but it’s still smaller than the U.S. deficit with Germany and it’s negligible when compared with America’s $350 billion deficit with China.

None of which even touches on the question of whether trade deficits are even an accurate reflection of a nation’s economic prosperity. In a Monday editorial, the Wall Street Journal tore through what it called Lighthizer’s trade deficit “preoccupation” and the “bizarre economics” at the centre of Trump’s trade agenda, which the paper called “dangerous to American prosperity.” As Foreign Affairs Minister Chrystia Freeland put it at the start of the talks last week, “Canada doesn’t view trade surpluses or deficits as a primary measure of whether trade works.”

Of course, Trump is merely playing to his blue-collar base in the rust-belt states of Pennsylvania, Ohio and Michigan, which delivered the presidency to him last November. “Great trade deals coming for American workers,” he tweeted last week before the talks began.

The question is whether the continuous chaos his presidency generates weakens his hand in the trade negotiations, or whether he might even undermine the talks on his own to placate his base.

Most American presidents have understood the difference between the job and the role they play as America’s moral leader. Trump doesn’t, because he has no sense of history — and no class. His tumultuous news conference last week, during which he said there was “blame on all sides” for Charlottesville, may have been a tipping point for his presidency. (As if there could be any moral equivalence between armed Klan members and neo-Nazis and the protesters who confront their repulsive messages.)

Of all the issues on which an American president is supposed to lead, race relations is the most sensitive and most important. Which explains why the private sector is fleeing Trump’s taint at a dead run: CEOs resigned en masse from the president’s two business councils, as did every member of his arts council, and at least nine major charities have cancelled events scheduled for his Palm Beach estate, Mar-a-Lago. It’s why the five Joint Chiefs of Staff put out statements denouncing racism and extremism, distancing themselves and their services from the Commander-in-Chief.

Watching a presidency in crisis while negotiating NAFTA 2.0, officials from all three countries must have been relieved Trump wasn’t intervening in the talks. And if Trump does go on Twitter, they might be best advised to ignore him.

The views, opinions and positions expressed by all iPolitics columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of iPolitics.

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The views, opinions and positions expressed by all iPolitics columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of iPolitics.